Comment: Masses should be aware of economic challenges

The Central Bank annual report of 2006 was launched last week, one month ahead of schedule which is most welcome. According to the report the growth rate was 7.4% and is said to be the best since 1978.

This is good news that anybody in the country can be happy about because we all know this growth is what we have been dreaming of for a long time. We are happy to hear of the economic miracles of China and India and worry about the failures of our politicians.

Also we know the challenges we face and what factors prevent our economy growing at a higher rate. In that sense we can accept the over enthusiasm of our leaders and policy advocates of the government to achieve a high growth rate.

However, to sustain the growth we need a more realistic analysis of this higher growth rate and it is the responsibility of the Central Bank (CB). Though it is a government institution we consider the CB an independent entity.

Any comment of the CB on the economy of the country whether it is positive or negative is not considered as pro or anti government (or the party in power). Whatever the political repercussions and criticism after any CB report, politicians did not challenge the CB. We are happy with that kind of political culture we have in a highly confrontational political climate in Sri Lanka.

The 2006 CB report has frequently 'used the government' as the subject such as "the government reiterated", "the government has taken steps". However, earlier CB reports used "the economy", or "the sector" or "Sri Lanka" as the subject and did not highlight what the government did.

This new style of writing has diminished the credibility of the CB report. Secondly the inclusion of the Mahinda Chintana ten-year horizontal development framework is also unnecessary and made it lose the independent look of the report.

If we look at the highlights in the report (page 17) under Agriculture policy it says key targets are increase productivity, production and competitiveness of the sector and so on.

Is this something that the CB report should specifically highlight? Were the policies of previous governments to reduce this? If this is an essential part of the CB report earlier reports should have also carried various policy papers and manifestos of the parties in power such as "Rata Perata", "Re-gaining Sri Lanka" and many more.

On page 27 the chapter on fertilizer subsidy has described favourable and unfavourable results of the subsidy. It highlighted only the inefficient distribution of resources and environmental issues as negative impacts.

The report has not touched on the cost, government expenditure on the subsidy and its contribution to the budget deficit. The huge subsidy cost is a burden on the government and any government will not be able to provide it forever. If the CB report highlights these matters it would create a dialogue and will make farmers aware of the real cost of the fertilizer they get.

On the same page the report mentions the establishment of the Agricultural Products Marketing Authority (APMA) to ensure a fair price for agro products and the government's expenditure on paddy purchasing - Rs.3,387 billion.

Is this adequate to discuss the present situation in the sector. Does the CB feel that APMA has solved all the marketing issues of the farmers?

This is still an unresolved question and the CB has the responsibility of analysing the effectiveness of government policies and advising the government. We wonder whether the farmers of this country have even heard about APMA.

These are a few highlights of the deficiencies of the report and the overall CB report 2006 has slightly deviated from the previous reports. Therefore the general impression of the users of the report may be that influence may have been excerted to perhaps change these parts in the report. This could have an adverse effect on the government.

Therefore it is imperative that government officials understand the best way of displaying their loyalty.

Neither the CB report nor statements of officials after the report was launched gave the reasons behind the highest growth rate after 30 years. Are the government's prudent policies the only reason? It is indeed the strongest factor behind the growth rate.

These home grown economic policies introduced in 2004 in Sri Lanka by the UPFA government and incorporated in the Mahinda Chintana against Regaining Sri Lanka of the UNF has shown positive results. Similar results have been achieved in India under the UPA government. In 1978 the higher growth rate was definitely the reason due to the policy change from a closed to open economy and accelerated economic activities.

The discussions on these economic gains should be independent and include all positive and negative features of the economy. The challenges before the country have worsened and new threats such as LTTE air power will affect FDI and tourism. High inflation, high oil price, high government debt, pressure on the exchange rate and deteriorating external resources are serious issues in the economy.

Government policy advocates should not conceal these facts. The masses who are acutely aware of the challenges will successfully face the situation.